Evidence suggests that methods of organization are taught and perpetuated as societal innovations. Understanding and teaching organization may go a long way towards alleviating poverty.
Individuals working side by side, but not together, can never be more than additive in their production. One worker’s product is added to another and then another to eventually become a community’s productivity. In contrast, organization is a multiplier. Studies on manufacturing companies provide direct evidence of this effect. Those that employ over 200 people are over 10 times more productive in terms of value added per employee than companies with less than 50 people.
This lesson can be applied to development more broadly. A recent Indian census identified 42 million enterprises. Given the working population of India, that works out to an average of 1.4 employees per company. Most companies in India are solo endeavors – microentrepreneurs working side by side in an additive fashion. In contrast, the United States is a society of multiplication. Most new firms start out with over five employees, and 25 percent of U.S. firms employ more than ten people. With increased organization comes the multiplier effects of increased productivity, profits, and development.
Given the benefits of an organized, collectively supported economy, why are so many nations still lacking this organization?
To get to the root of this historical problem, it is important to look at organization on a smaller scale. The institutional organizations that emerge in development are natural extensions of ever smaller organizational patterns between individuals that, over time, develop into strong institutions.
Madura Microfinance is a leader in the micro. Our clients require microloans to support microbusinesses. Most of the businesses we work with are run by a single microentrepreneur. They are designed with livelihood in mind, not economic growth, savings, or value creation.
Why are these entrepreneurs and their businesses stuck in micro mode?
Dr. Madhu Viswanathan points at a fundamental way of thinking about business. Microentrepreneurs, he reasons, think about their own hard work more than they think about creating value for clients. His Marketplace Literacy initiative was designed to combat this framework of thinking. It teaches participants to question why they buy products, and then turn that lens in on their own business. Ask what value you are creating for your clients, the program urges.
Madura Microfinance jumped to activate the Marketplace Literacy initiative within its programming in 2010, creating a video-based training program dubbed a “MBE ” or microbusiness education to help our microentrepreneurs think about business differently.
Our MBE program has resulted in a number of lessons learned and has influenced how Madura Microfinance reaches its clients. But there was an unexpected insights during the pilots.
The Marketplace Literacy initiative requires audience participation. In person, a team could physically organize participants into smaller groups. Once we adapted the curriculum to video, hoping to reduce costs and scale the project, participants needed to organize themselves.
There are a couple places where the video instructor asks participants to pause the video, organize into groups of three or four and talk about some particular question or topic. The participants remained seated, confused. When prompted by the pilot team, they told our team that they didn’t know how to do this. This result was even more pronounced among participants with lower levels of education.
The videos had to be changed to give explicit instruction on how to organize into groups.
Once the video included specific instructions on how to count themselves out and divide their group up into smaller groups, participants were able to complete the training without outside assistance.
It is easy to forget that organization is a taught skill. It is an innovation that we have actively passed along through teaching and learning. It is not an inherent human trait. The poor are not less able to organize, they simply haven’t been taught how.
In developed economies children begin learning about human organization from a very young age. Our schools are inherently organized. Children are given desks to sit in, lines to stand in, and the expectation of raising their hands and waiting to be called upon and group projects to work on. By the time they leave school they will have witnessed a variety of ordered systems. They will have chosen teams in physical education, counted off in fours and grouped themselves according to number. They will have been assigned partners based on grades, interest, the alphabet, or any number of other delineations. Children who do not participate in formal education, or spend fewer years in school, will undoubtedly be exposed to fewer systems of organization.
Beyond understanding the nuts and bolts of organization, the benefits are not always obvious. Without studies conducted on the productivity of manufacturing firms, we wouldn’t intuitively know that larger firms are significantly more productive than smaller firms. In much the same way, communities of farmers who have never seen a community organize for a mutually beneficial project or business objective may not realize the gains to be had.
Recognizing that advantages and methods of organization are taught to citizens of economically advanced countries and that not all people have this knowledge base may go a long way towards alleviating poverty.
The first step may be as simple as teaching people how to organize themselves into groups.